By Larry Jones
March 24, 2008

Local officials met with key congressional staff in Washington on March 20 to voice strong opposition to the so-called Mobile Workforce State Income Fairness and Simplification Act of 2007 (H.R. 3359), a bill that would prohibit state and local governments from taxing the income of out-of'state workers performing duties within their borders for 60 days or less. Although most cities do not impose an income tax, it is estimated that 25 percent of the nation’s cities and some counties levy an income tax on mobile workers. If enacted, state and local governments would lose billions of dollars annually in income tax revenues.

Local officials met with key congressional staff responsible for the proposal: Alexandrine Debianchi, legislative assistant to Rep. Hank Johnson (GA), the primary sponsor of H.R. 3359; and Celeste Drake and Norberto Salinas, the legislative director and counsel respectively of the Subcommittee on Commercial and Administrative Law. Local officials attending the meeting included representatives from the cities of St. Louis, Columbus, Cincinnati, Mason and Madison (OH), the Ohio Municipal League, Grand Rapids, Dearborn, the Michigan Municipal League, Philadelphia, The U.S. Conference of Mayors, the National League of Cities and the National Association of Counties. A Representative from New York state also joined local officials at the meeting.

In explaining their opposition to the bill, local officials pointed out that in some states, local governments depend very heavily on income taxes. Melinda Frank, income tax administrator for Columbus, explained that the “local income tax is the primary method of funding municipal operations in 569 cities and villages in the state of Ohio.” She said in 2006 Columbus alone collected over $255 million from income taxes imposed on non-residents. Most of these funds would be affected by the proposal. Jim Brown, attending the meeting on behalf of St Louis, said the city estimates it would lose $86 million annually. Estimated revenue losses were also cited for a number of other cities: Kansas City, $160 million; Grand Rapids $11 million; Detroit $70 million; 22 other Michigan cities, $123 million. Philadelphia collects $585 million in wage and net profit taxes from nonresident workers that would be affected. New York state estimates a loss between $150 million to $200 million annually.

The Conference and other state and local groups told congressional staff that the legislation couldn’t have come at a worse time. Local governments, they explained, are currently experiencing a reduction in revenues due to the downturn in the economy, fueled in part by unprecedented housing foreclosures and rising oil prices. They criticized the legislation because it would preempt state and local taxing authority and further erode their ability to provide essential government services such as police, fire protection, education, transportation and health care. Local officials attending the meeting were united in expressing the view that the federal government should not be in the business of telling state and local governments what they should and should not tax.

A subcommittee hearing on H.R. 3359 was held last September, but local officials were not invited to testify. As a result, they are organizing a series of meetings with their congressional delegations to inform them about the financial impact the bill will have on state and local governments. Although the bill is not currently scheduled for action, a number of companies that employ mobile workers are pushing hard to get Congress to approve the legislation.